Indian property companies are expected to raise hundreds of millions of dollars on overseas stock markets by listing real estate investment trusts (REITs) in the coming months amid tightening restrictions on lending to the sector.
Sushil Ansal, chairman of Ansal Properties and Infrastructure, a large Delhi-based developer, said the company was considering listing a $250 million to $300 million realty trust in Singapore or the Gulf.
"Indian real estate companies are definitely looking at alternate markets around the world," Ansal said. "They can go to Gulf countries, Singapore, or other countries."
Ansal is the latest among a number of large Indian developers to consider listing a real estate trust abroad - the controlling shareholders of DLF, the country's largest listed developer, are also said to be considering listing an REIT in Singapore.
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This follows the listing in August by Ascendas, a Singapore-based company, of a S$500 million ($332 million) trust containing Indian properties. Although not strictly a Reit as defined by Singapore regulations, the listing has been designed to provide Reit-like returns.
Driven by India's rapidly expanding economy, the country's property sector has been growing by 30 per cent a year, with lending to commercial real estate companies rising 89 per cent year-on-year.
Alarmed that the country's banks might become exposed to bubbles in the property sector, and also by the impact of overseas borrowing on the rupee, India's central bank has introduced tight controls on lending to real estate. These have raised the cost of capital for real estate companies, forcing them to consider other options offshore.
"Capital is available - if I want I can raise any amount. But the cost of that capital is high," said I Syam Prasad Reddy, chief executive officer of Indu Projects, a Hyderbad-based developer.
According to Ernst & Young, Indian developers raised $4.36 billion in the 12 months ending in August this year through domestic initial public offerings.
Developers keen to avoid further diluting their holdings in their flagship companies were now considering listing realty trusts. But Indian regulations do not permit Reits, forcing developers to look overseas.
"There is a need for capital at the moment, huge amounts of capital," said Ganesh Raj, a partner and head of Ernst & Young's India real estate practice.
The process of listing Reits abroad can be complicated. Singapore, for instance, requires properties to be 90 per cent complete to qualify for inclusion in a Reit - a challenging requirement for Indian developers, many of whose projects are in their first phases of development.
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